Chancellor George Osborne has announced plans to cut UK corporation tax from 20 per cent to just 15 per cent.

At this level, Britain would have one of the lowest corporation tax rates of any major developed economy.

'We must focus on the horizon and the journey ahead and make the most of the hand we've been dealt', Osborne told the Financial Times.

The Chancellor claims the corporation tax cut will help woo businesses to invest in post-Brexit Britain.

Here, This is Money explains the nitty-gritty of what corporation tax is and how the rate cut could affect businesses and the tax-paying public.

Cutting to the chase: Chancellor George Osborne has announced plans to cut UK corporation tax from 20 per cent to less than 15 per cent

What is corporation tax?

While individuals pay income tax on their earnings, businesses pay corporation tax on theirs.

It is levied on a company's profits over a set period of time.

Taxable profits are calculated by adding together a company's total income and chargeable gains (how much a company's asset has gone up in value between the time it's bought and sold), and subtracting any payments the company has to make to carry out its business.

Some firms can get deductions on their corporation tax or use tax credits to slim it down.

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How does the UK's current corporation rate compare to the EU/wider world?

Since 1 April 2015, the basic rate of corporation tax in the UK has been 20 per cent. So, a company generating £400,000 of profits would pay around £80,000 in corporation tax.

Across the EU, the average rate of corporation tax is 22.09 per cent, data from KPMG shows. Across the world, the average rate of corporation tax is 23.63 per cent.

Areas where corporation tax is higher than the UK include Argentina (35 per cent), North America (33.25 per cent on average), Malta (35 per cent), India (34.61 per cent), Japan (32.26 per cent) and Zambia (35 per cent).

Places where corporation tax is at 0 per cent include Bermuda, the Cayman Islands and Guernsey, KPMG said.

Compare current global tax rates from around the world with KPMG's table HERE.

Or use this map to click around the world of corporate tax.

If UK corporation tax is reduced to less than 15 per cent, where do we stand in the world?

If Britain goes ahead with the Chancellor's proposal and cuts corporation tax by around 5 percentage points to less than 15 per cent, Britain would have one of the lowest rates of any major economy in the world.

Taking the UK's rate down to less than 15 per cent would bring the UK nearly in line with Ireland's 12.5 per cent rate.

Other countries with a 15 per cent rate include Albania, Iraq, Lithuania and Mauritius.

Why is the Chancellor planning to cut Britain's corporation tax rate?

In his own words, Remain campaigner George Osborne told the Financial Times Britain needs to become a 'super-competitive economy' with low business taxes and a global focus post-Brexit.

According to the Chancellor, the move is necessary to prove to investors that Britain is still 'open for business.'

In other words, in the Chancellor's mind, a sizable cut in corporation tax rates will encourage businesses and investors from the UK and overseas to keep on ploughing their money into Britain.

The signs from Osborne of a softer approach to fixing the public finances and tax cuts to woo investors come after Bank of England Governor Mark Carney said last week that he believed the economy would need more monetary stimulus soon.

Comment: Remain in the EU campaigner George Osborne told the Financial Times Britain needs to become a 'super-competitive economy' with low business taxes post-Brexit

When will the corporation tax cut be introduced?

The Chancellor hasn't given any details on when the plans to cut corporation tax would be introduced. But, he made it clear Britain should 'get on with it.'

In his most recent Budget statement in March, Osborne announced a cut in corporation tax to 17 per cent by 2020, down from 20 per cent now.

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The Treasury told This is Money it has no further details of any potential timeframe.

Will the rate cut turn Britain into a tax haven for multi-nationals?

It's not out of the question. However, Osborne or any other Chancellor needs to balance a potential political fallout with the impact on the economy of cutting rates further.

The government - as well as some multinationals - have come under fire in recent years for 'sweetheart deals', where companies are able to arrange their own, often generous, tax rate.

Household brands including Google, Amazon and Starbucks have all come under sharp scrutiny for paying what some believe is not their fair share of tax, although they all have technically played by the rules.

Taxpayers may not accept corporations being allowed to pay less tax, when some earners have up to 45 per cent of their income taken from them in taxes.

Will a cut in corporation tax really boost the economy like the Chancellor says?

What is clear is that a 5 percentage point cut in UK corporation tax will prick up the ears of businesses looking to get a foothold in Britain, or those who already have one.

On one level, the number of businesses churning money into Britain is likely to increase.

If Britain's corporation tax rate was cut to less than 15 per cent, it would have one of the lowest rates of any advanced economy in the world.

Cushioned by a decent infrastructure and resources, this would make the UK a very appealing prospect for big companies.

But, with the rate being cut, Britain would have to see a considerable rise in the amount of profits made by companies in the UK to make up for the fall in revenues as a result of the tax rate cut.

In the 1970s UK corporation tax was over 50% - so is this 'race to the bottom' bad for individual taxpayers?

Where's our cut? hile the 'race to the bottom' is good for businesses looking for the next tax haven, individual taxpayers are left asking: when's my income tax rate cut coming, Mr Osborne?

EU bureaucrats have raised concerns that Osborne's move could put countries in a 'race to the bottom' for corporation tax rates.

If Britain starts to attract business from other countries because of its low corporation tax, others could feel under pressure to do the same to keep up.

Meanwhile the head of tax at the Organisation for Economic Co-operation and Development has warned that Brexit ‘may push the UK to be even more aggressive in its tax offer’, but that further steps in that direction ‘would really turn the UK into a tax haven type of economy’.

Between 1973-4, the standard corporation tax rate in the UK was 52 per cent, only falling to 50 per cent in 1983, data from the Institute for Fiscal Studies reveals.

By 1999, the rate had fallen to 30 per cent.

As the financial crisis hit in 2008, the rate of corporation tax was reduced to 28 per cent.

Since 2008, the rate has gradually been reduced to the current level of 20 per cent.

With the UK facing uncharted waters since the Brexit vote, the Government is keen to ensure money keeps on coming into the country, while reassuring firms that Britain is open for business.

However the Chancellor faces a balancing act: taxpayers may not want to stomach static income tax rates and cuts to other services while businesses enjoy lower tax rates.